M/s. Caneron Concrete Industries Pvt. Ltd, New Delhi V. ITO, New Delhi

ITA 964/DEL/2009

• Counselvise Citation: 96420114 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 28-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: RANO JAINARS
• Keywords: Unexplained cash credit; Income from undisclosed sources; Accommodation entries; Capital receipt; Onus to prove
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI I BENC H BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM ITA NO.964/D/2009 ASSESSMENT YEAR:2005-06 M/S CANERON CONCRETE INDUSTRIES PVT. LTD., E-163, PANDAV NAGAR, DELHI-91 V/S . INCOME TAX OFFICER, WARD-3 (2), NEW DELHI [PAN:AAACC 0245M] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI VED JAIN & RANO JAIN,ARS REVENUE BY SHRI A.K. MONGA, DR DATE OF HEARING 07-12-2011 DATE OF PRONOUNCEMENT 06-01-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 17.03.2009 BY THE ASSESSEE AG AINST AN ORDER DATED 12 TH JANUARY, 2009 OF THE LEARNED CIT(A)-VI, NEW DELHI, RAISES THE FOLLOWING GROUNDS:- 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD, BOTH IN THE EY E OF LAW AND ON THE FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING AN ADDITION OF ` `16,50,000/- AS INCOME FROM UNDISCLOSED SOURCES. (II) THAT THE ABOVE-SAID ADDITION WAS MADE IGNORING THE MATERIAL AND EVIDENCES BROUGHT ON RECORD BY THE APPELLANT IN SUPPORT OF HIS CONTENTION AND BY INDULGING IN SURMISES, CON JECTURE AND WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD S. (III) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION ON ACCOUNT OF SHARE CAPITAL DESPITE THE FACT THAT THE ASSESSEE HAS DISCHARGED HIS ONUS BY ESTABLISHING THE IDENTITY OF THE SHAREHOLDERS. 3. THAT THE ABOVE-SAID ADDITIONS ARE UNTENABLE IN T HE EYE OF LAW, HAVING BEEN MADE ON THE BASIS OF THE MATERIAL COLLE CTED AT THE I.T.A. NO.964/D/2009 2 BACK OF THE ASSESSEE WITHOUT PROVIDING COPY OF THE SAME AND PROVIDING OPPORTUNITY TO REBUT THE SAME. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ADDITION WHICH WAS MADE ON THE BASIS OF STATEMENT O F A PERSON WITHOUT GIVING ASSESSEE AN OPPORTUNITY TO CROSS EXA MINE THE SAME. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF ` ` 1.23.800/- FILED ON 19.10.2005 BY THE ASSESSEE, AF TER BEING PROCESSED ON 13.01.2006 U/S 143(1) OF THE INCOME-TAX ACT, 1961 ( HEREAFTER REFERRED TO AS THE ACT), WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ISSUED ON 28 TH JULY, 2006. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE RAISED SHARE CAPITAL OF ` `32,00,000/- DURING THE YEAR UNDER CONSIDERATION. INTER ALIA, THE ASSESSEE RECEIVED AN AMOUNT OF ` 4,50,000/- FROM ONYX EXIM; ` 4 ,50,000/- FROM SHIMMER MARKETING , ` 3,00,000/- FROM RAPID IMPEX P LTD. AND ` 4,50,000/- FROM JAINCO METALS (P) LTD. IN RESPONSE TO NOTICE U/S 133(6) O F THE ACT ISSUED TO THE SAID SHARE APPLICATIONS, NO REPLY WAS RECEIVED FROM M/S RAPID IMPEX PVT. LTD., AND NOTICE ISSUED TO M/S JAINCO METALS PVT. LTD. WAS RE TURNED UNSERVED. MEANWHILE, THE AO RECEIVED A REPORT FROM INVESTIGATING WING, W HICH REVEALED THAT THAT ENTRY OPERATOR SHRI S.H. MALIK ADMITTED THAT HE WAS INSTR UMENTAL IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES,. IN HIS STATEMENT RECORDED ON 23 RD JUNE, 2004, SHRI MALIK ADMITTED THAT NO BUSINESS WAS CARRIED ON BY ONYX EXIM & SHIMMER MARKETING, IN WHICH HE WAS A DIRECT OR AND THESE COMPANIES PROVIDED ENTRIES. THE ASSESSEE IS STATED TO HAVE R ECEIVED AN ENTRY FOR AN AMOUNT OF ` 4,50,000/- FROM EACH OF THESE TWO COMPANIES BY WAY OF SHARE CAPITAL. THE AO CONFRONTED THE STATEMENT OF SHRI S. H. MALIK TO SHRI R.C.GUPTA, A DIRECTOR OF THE ASSESSEE COMPANY AND REQUESTED HIM TO PRODUCE THE DIRECTORS/CONTROLLING PERSONS OF THE AFORESAID COMP ANIES ALONG WITH THEIR BOOKS IN ORDER TO AND ESTABLISH THE IDENTITY AND CREDITWORT HINESS OF AFORESAID ENTITIES AND I.T.A. NO.964/D/2009 3 GENUINENESS OF THE TRANSACTIONS. HOWEVER, THE ASSE SSEE DID NOT PRODUCE ANY OF THE DIRECTORS OF THE FOLLOWING FOUR COMPANIES FROM WHOM SHARE CAPITAL WAS RECEIVED: SR. NO. NAME OF THE SHAREHOLDERS AMOUNT 1. M/S ONYX EXIM PVT. LTD. 4,50,000.00 2. M/S SHIMMER MARKETING PVT. LTD. 4,50,000.00 3. MS. JAINCO METALS PVT. LTD. 4,50,000.00 4. M/S RAPID IMPEX PVT. LTD. 3,00,000.00 TOTAL: 16,50,000.00 2.1 THOUGH THE ASSESSEE SUBMITTED PAN AND COPIES OF THE ACKNOWLEDGEMENTS OF FILING OF RETURNS ALONG WITH TH EIR CONFIRMATIONS AND BANK DETAILS OF THE AFORESAID COMPANIES, THE ASSESSEE D ID NOT PRODUCE EITHER THE DIRECTORS OR THE BOOKS OF ACCOUNT OF THE SAID COMPA NIES, AS DIRECTED BY THE AO. IN THIS SITUATION, SINCE THE ASSESSEE FAILED TO EST ABLISH IDENTITY AND CREDITWORTHINESS OF THE AFORESAID FOUR COMPANIES N OR ESTABLISHED GENUINENESS OF THE TRANSACTIONS, THE A.O. ADDED THE AMOUNT OF ` ` 16,50,000/- 68 OF THE ACT. 3. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITIO N IN THE FOLLOWING TERMS:- 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY LEARNED AR AND MY OBSERVATIONS ON THE ISSUE ARE AS UNDER:- I) DURING THE YEAR UNDER CONSIDERATION, THE APPELLA NT HAS RAISED THE SHARE CAPITAL OF RS.32 LACS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED FOR THE DETAILS OF THE ADDI TIONS MADE TO SHARE CAPITAL AND ISSUED NOTICES U/S 133(6) TO VARIOUS SH ARE HOLDERS. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT NOTICE U/S 1 33(6) SENT TO M/S JAINCO METALS (P) LTD. AT THE GIVEN ADDRESS WAS REC EIVED BACK UNSERVED. SIMILARLY, FOR NOTICE ULS 133(6) SENT TO M/S. RAPID IMPEX PVT. LTD., NO REPLY WAS RECEIVED. IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER REQUIRED THE PRESENCE OF PERSONS CONTROLLIN G M/S. JAINCO METALS (P) LTD. AND M/S. RAPID IMPEX PVT. LTD. RESPECTIVEL Y ALONGWITH BOOKS OF ACCOUNTS TO VERIFY THE CLAIM OF GENUINENESS. AS PER PARA 4.2 OF THE ASSESSMENT ORDER, THE APPELLANT SUBMITTED THAT THE CONFIRMATION, CHEQUE AND BANK DETAILS, PAN AND COPY OF THE INCOME TAX RETURN HAVE ALREADY BEEN SUBMITTED. SIMILARLY, VIDE PARA 4 .4 OF THE ASSESSMENT ORDER IT IS EVIDENT THAT FOR M/S. RAPID IMPEX (P) LTD. THE APPELLANT SUBMITTED THAT THE CONFIRMATION, CHEQUE A ND BANK DETAILS PAN NO. AND COPY OF INCOME TAX RETURN HAVE ALREADY BEEN SUBMITTED I.T.A. NO.964/D/2009 4 AND THEY ARE TRYING TO PRODUCE THE CONCERNED PERSON S WHICH IS LIKELY TO TAKE SOME TIME. HOWEVER, NO SUCH PERSON WAS PRODUCE D. HENCE, THE ASSESSING OFFICER HAS MADE THE ADDITION ULS 68 OF T HE ACT AS UNEXPLAINED CREDITS. II) I FURTHER FIND THAT DURING THE ASSESSMENT PRO CEEDINGS IT CAME TO THE NOTICE OF THE ASSESSING OFFICER THAT THE APPELLANT HAS RECEIV ED SHARE CAPITAL OF RS.4,50,000/- EACH FROM MIS. ONYX- EXIM PVT. LTD. A ND M/S. SHIMMER MARKETING (P) LTD. IT WAS FURTHER REVEALED FROM THE REPORT OF THE INVESTIGATING WING THAT ONE MIS. S.H. MALIK IS THE DIRECTOR IN BOTH THESE COMPA NIES AND HE HAS ADMITTED THAT THESE COMPANIES ARE INVOLVED IN PROVIDING ENTRIES A ND NO ACTUAL BUSINESS IS BEING CARRIED ON. IT WAS FURTHER EXPLAINED BY SH. M ALIK IN HIS STATEMENT THAT THE CHEQUES OR DD/PAY ORDER IS ISSUED IN LIEU OF CASH T O THE PARTY CONCERNED AND FOR THIS THEY GET THE COMMISSION. IN LIGHT OF THE ABOVE INVESTIGATION REPORT, THE APPELLANT WAS REQUIRED TO PRODUCE THE CONCERNED PER SONS SO AS TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE E NTRIES APPEARING IN THE BOOKS OF ACCOUNTS. COPY OF THE STATEMENT OF SH. S.H. MALI K WAS ALSO PROVIDED. III) THE LD. A.R. HAS SUBMITTED THAT THAT ALL THE RELEVA NT DOCUMENTS LIKE CONFIRMATION, PAN, COPY OF INCOME TAX RETURN, BANK/ CHEQUE DETAILS ETC. WERE PRODUCED TO DISCHARGE THE ONUS OF PROVING THE IDENT ITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THESE PARTIES. FURTHER, TIME GIVEN TO THE APPELLANT WAS VERY SHORT AND THE CASE WAS FINALIZED ARBITRARILY. IN THIS REGARD, I FIND THAT AS FAR AS M/S. RAPID IMPEX PVT. LTD. AND MIS. JAINCO METALS (P) LTD. ARE CONCERNED, THE ASSESSING OFFICER HAD SENT THE NOTIC E U/S 133(6)ON THE GIVEN ADDRESSES. HOWEVER, IN CASE OF M/S. JAINCO METALS ( P) LTD., THE NOTICE WAS RECEIVED BACK AND IN CASE OF M/S. RAPID IMPEX PVT. LTD. THERE WAS NO RESPONSE. HENCE, THE A.O. REQUIRED THE APPELLANT TO PRODUCE T HE PARTIES CONCERNED ALONGWITH BOOKS OF ACCOUNT. HOWEVER, THE SAME WAS N OT DONE. THE APPELLANT HAS SUBMITTED THAT TIME GIVEN WAS VERY SHORT. HOWEVER, I FIND THAT THE PROCEEDINGS WERE GOING ON AND THE ADDRESSES WERE SUBMITTED BY T HE APPELLANT ITSELF AND SINCE THERE WAS NO RESPONSE, THE ASSESSING OFFICER RIGHTLY REQUIRED THE PRESENCE OF THE (CONCERNED PARTIES. THE APPELLANT HAS NOWHER E INDICATED THAT WHAT EFFORTS HAVE BEEN MADE BY HIM AND WHY THE SAME HAD FAILED. IV) I FURTHER FIND THAT THE LD. A.R. HAS RAISED OBJ ECTION ON THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE STATEMENT OF SH. S.H. MALIK. HOWEVER, I FIND THAT IN THIS REGARD, WHAT THE ASSESSING OFFICER DID WAS TO APPRISE THE APPELLANT ABOUT THE FACTS EMERGING FROM THE STATEMENT OF SH. S.H. MALIK . A COPY OF ITS STATEMENT OF SH. S.H. MALIK WAS ALSO GIVEN TO THE APPELLANT. HOW EVER, AT THE SAME TIME, THE APPELLANT WAS ASKED TO PROVE THE IDENTITY, GENUINEN ESS AND CREDITWORTHINESS OF THE ENTRIES MADE WITH REGARD TO ONYX EXIM PVT. LTD. AND M/S. SHIMMER MARKETING(P)LTD. IT IS NOT A CASE WHERE THE ASSESSI NG OFFICER HAS BASED HIS DECISION ENTIRELY ON THE STATEMENT OF SH. S.H. MALI K. THE APPELLANT HAS BEEN PROVIDED SPECIFIC OPPORTUNITY TO PROVE THE ENTRIES APPEARING IN BOOKS OF ACCOUNTS. I.T.A. NO.964/D/2009 5 V) VIDE GROUND NO. 4 OF THE APPEAL, THE 'APPELLANT HAS RAISED THE OBJECTION THAT THE AMOUNT ACTUALLY DISALLOWED IS RS.15,00,000/- AS AGAINST: RS. 16,50,000/- AS PER THE DETAILS GIVEN BELOW :- A) ONYX EXIM (P) LTD. ] RS. 7,50,000/- B) SHIMMER MARKETING (P) LTD. ] C) RAPID LMPEX (P)LTD. RS. 3,00,000/- D) JAINCO METALS (P) LTD. RS. 4,50,000/- NO SPECIFIC OBJECTION HAS BEEN RAISED DURING THE A PPELLATE PROCEEDINGS. FURTHER, I FIND THAT DURING THE PROCEEDINGS, THE LD. A.R. HA S HIMSELF GIVEN THE DETAILS AS UNDER: SR. NO. NAME OF THE SHAREHOLDERS AMOUNT 1. ONYX EXIM PVT. LTD. . 4,50,000.00 2. SHIMMERMARKETING (P) LTD. 4,50,000.00 3. MIS.JAINCO METALS (P) LTD. 4,50,000.00 4. MIS. RAPID IMPEX PVT. LTD. 3,00,000.00 TOTAL 16,50,000.00 HENCE, IN VIEW OF THE SAME, I FIND THAT APPARENTLY THERE IS NO MISTAKE IN TAKING THE FIGURE AT RS.16,50,000/-. HOWEVER, THE ASSESSING OF FICER IS DIRECTED TO VERIFY THE FIGURES FROM HIS RECORDS. VI) DURING THE PROCEEDINGS BEFORE 'ME', LD. AR PLAC ED RELIANCE ON CERTAIN CASE LAWS. HOWEVER, I FIND THAT THE FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE ARE DIFFERENT. AS DISCUSSED ABOVE, IN THE PRESENT CASE, THE APPELLANT HAS BEEN REQUIRED SPECIFICALLY TO PROVE THE GENUINENESS OF T HE TRANSACTIONS. INVESTIGATIONS WERE MADE AND THE APPELLANT WAS INTIMATED ABOUT THE RESULTS OF THE EFFORTS AND INFORMATION AVAILABLE. SPECIFIC QUERIES WERE RAISED AND THE APPELLANT WAS REQUIRED TO PROVE THE GENUINENESS OF THE CREDITS AP PEARING IN ITS BOOKS OF ACCOUNTS. HOWEVER, IT HAS FAILED TO DO SO. IN CASE OF CIT VS. SOPHIA FINANCE LTD. 205 ITR 98, HON'BLE HIGH COURT OBSERVED AS UNDER: 'AS WE READ SECTION 68 IT APPEARS THAT WHENEVER A SUM I S FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE THEN, IRRES PECTIVE OF THE COLOUR OR THE NATURE OF THE SUM RECEIVED WHICH IS SOUGHT TO B E GIVEN BY THE ASSESSEE, THE INCOME-TAX OFFICER HAS THE JURISDICTI ON TO ENQUIRE FROM THE ASSESSEE THE NATURE AND SOURCE OF THE SAID AMOUNT. WHEN AN EXPLANATION IN REGARD THERETO IS GIVEN BY THE ASSESSEE, THEN IT IS FOR THE INCOME-TAX OFFICER TO BE SATISFIED WHETHER THE SAID EXPLANATIO N IS CORRECT OR NOT. IT IS IN THIS REGARD THAT ENQUIRIES ARE USUALLY MADE IN O RDER TO FIND OUT AS TO WHETHER, FIRSTLY, THE PERSONS FROM WHOM MONEY IS AL LEGED TO HAVE BEEN RECEIVED ACTUALLY EXISTED OR NOT. SECONDLY, DEPENDI NG UPON THE FACTS OF I.T.A. NO.964/D/2009 6 EACH CASE. THE INCOME-TAX OFFICER MAY EVEN BE JUSTI FIED IN TRYING TO ASCERTAIN THE SOURCE OF THE DEPOSITOR, ASSUMING HE IS IDENTIFIED, IN ORDER TO DETERMINE WHETHER THAT DEPOSITOR IS A MERE NAME- LENDER OR NOT. BE THAT AS IT MAY, IT IS CLEAR THAT THE INCOME-TAX OFF ICER HAS JURISDICTION TO MAKE ENQUIRIES WITH REGARD TO THE NATURE AND SOURCE OF A SUM CREDITED IN THE BOOKS OF ACCOUNT OF AN ASSESSEE AND IT WOULD BE IMMATERIAL AS TO WHETHER THE AMOUNT SO CREDITED IS GIVEN THE COLOUR OF A LOAN OR A SUM REPRESENTING THE SALE PROCEEDS OR EVEN RECEIPT OF S HARE APPLICATION MONEY. THE USE OF THE WORDS 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECTION 68 INDICATES THAT THE SAID SECTION IS VERY WIDELY WORD ED AND AN INCOME-TAX OFFICER IS NOT PRECLUDED FROM MAKING AN ENQUIRY AS TO THE TRUE NATURE AND SOURCE THERE OF EVEN IF THE SAME IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY.' WHILE DISCUSSING THE APPLICATION OF SECTION 68 HON' BLE HIGH COURT IN CASE OF CIT VS. SOPHIA FINANCE LTD FURTHER OPINED AS UNDER: 'WHAT IS CLEAR, HOWEVER, IS THAT SECTION 68 CLEARLY PERMITS AN INCOME- TAX OFFICER TO MAKE ENQUIRIES WITH REGARD TO THE NA TURE AND SOURCE OF ANY OR ALL THE SUMS CREDITED IN THE BOOKS OF ACCOUN T OF THE COMPANY IRRESPECTIVE OF THE NOMENCLATURE OR THE SOURCE INDI CATED BY THE ASSESSEE. IN OTHER WORDS, THE TRUTHFULNESS OF THE A SSERTION OF THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNT CAN BE GONE I NTO BY THE INCOME-TAX OFFICER. IN THE CASE OF STELLAR INVESTMENT LTD, [1991] 192 ITR 287 (DELHI), THE INCOME- TAX OFFICER HAD ACCEPTED THE I NCREASED SUBSCRIBED SHARE CAPITAL. SECTION 68 OF THE ACT WAS NOT REFERRED TO AND THE OBSERVATIONS IN THE SAID JUDGMENT CANNOT MEAN THAT THE INCOME-TAX OFFICER CANNOT OR SHOULD NOT GO INTO THE QUESTION A S TO WHETHER THE ALLEGED SHAREHOLDERS ACTUALLY EXISTED OR NOT. IF TH E SHARE HOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INV ESTED MONEY IN THE PURCHASE OF SHARES THEN THE AMOUNT RECEIVED BY THE COMPANY WOULD BE REGARDED AS A CAPITAL RECEIPT AND TO THAT EXTENT TH E OBSERVATIONS IN THE CASE OF STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI), ARE CORRECT BUT IF, ON THE OTHER HAND, THE ASSESSEE OFFERS NO E XPLANATION AT ALL OR THE EXPLANATION OFFERED IS NOT SATISFACTORY THEN, THE P ROVISIONS OF SECTION 68 MAY BE INVOKED. IN THE LATER CASESECTION 68, BEING A SUBSTANTIVE SECTION, EMPOWERS THE INCOME-TAX OFFICER TO TREAT SUCH A SUM AS INCOME OF THE ASSESSEE, WHICH IS LIABLE TO BE TAXED IN THE PREVIO US YEAR IN WHICH THE ENTRY IS MADE IN THE BOOKS OF ACCOUNT OF THE ASSESS EE.' VII) IN VIEW OF THE ABOVE DISCUSSION, I FIND THAT THE ASSESSING OFFICER HAS RIGHTLY TREATED THE AMOUNT OF RS. 16,50,000/- AS UNEXPLAINED CREDIT U/S 68 AS THE APPELLANT HAS FAILED TO DISCHARGE ITS ONUS O F PROVING THE I.T.A. NO.964/D/2009 7 GENUINENESS AND CREDIT WORTHINESS OF THE ENTRIES AP PEARING IN ITS BOOKS OF ACCOUNT . 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). AT THE OUTSET, THE LD. AR ON BEHALF OF THE ASSESSEE WHILE INVITING OUR ATTENTION TO DETAILS PLACED ON PAGE 11 TO 20 OF THE PAPER BOOK CONTENDED THAT THE ASSESSEE SUBMITTED ALL THE RELEVANT DETAILS VIZ . CONFIRMATIONS OF THE INVESTORS, AND COPIES OF ACKNOWLEDGMENTS OF FILING RETURNS ALO NG WITH PAN AND CHEQUE NUMBER TO THE A.O. SINCE THE ASSESSEE DISCHARGED T HE PRIMARY ONUS ESTABLISHING IDENTITY OF THE AFORESAID FOUR COMPANI ES, NO SUCH ADDITION CAN BE MADE IN VIEW OF DECISIONS IN CIT VS. LOVELY EXPORTS (P) LTD. (2008) 6 DTR (S.C.) ,308;CIT VS. VALUE CAPITAL SERVICES (P) LTD. (2009) 307 ITR 334;CIT VS. DIVINE LEASING & FINANCE LTD. (2008) 299 ITR 268 (DEL.);CI T VS. ORISSA CORPORATION (P) LTD. (1986) 159 ITR 78 (S.C.)AND CIT VS. OASIS HOSP ITALITIES (P) LTD. IN ITA NO.2093 OF 2010 DATED 31.1.2011, THE LD. AR SUBMITT ED. THE LD. AR FURTHER POINTED OUT THAT STATEMENT OF SHRI S.H. MALIK WAS R ECORDED ON 23 RD JUNE, 2004 WHILE THE AMOUNTS WERE RECEIVED FROM THE AFORESAID COMPANIES ON 23 RD DECEMBER, 2004, 28.12.2004 AND 6 TH JANUARY, 2005. THUS, NO RELIANCE CAN BE PLACED ON THE STATEMENT OF SHRI S.H. MALIK. ON THE OTHER HAND, LEARNED DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS. AS IS APPARENT FROM T HE FACTS OF THE CASE, THE ASSESSEE, INTER ALIA, RECEIVED FOLLOWING AMOUNTS TO WARDS SHARE CAPITAL: SL. NO. NAME PAN NO. OF SHARES AMOUNT[IN ` ] CHEQUE NOS & DATE 1 ONYX EXIM P. LTD, 2842, CLASSIC APMT. DARYAGANJ, DELHI AAACO1979R 45,000 4,50,000 CH. NO.326178 DT.23.12.04 OF SYND BANK 2. RAPID IMPEX PVT. LTD., H-16/332 BAPA NAGAR, AACCR5081P 30,000 3,00,000 CH.NO.325932 DT.23.12.04 I.T.A. NO.964/D/2009 8 KAROL BAGH, N.D.-5 5. JAINCO METALS IND.PVT. LTD., 313 THANSINGH NGR. ANAND PARBAT, N.D. AABCR2938C 45,000 4,50,000 CH.NO.000011 DT.28.12.04 6. M/S SHIMMER MARKETING PVT. LTD., 2842, MOTI MAHAL ST DARYAGANJ, DELHI AAFCS1881B 45,000 4,50,000 CH.NO.326202 DT.6.1.2005. 5.1 THE ASSESSEE SUBMITTED CONFIRMATIONS OF THE AFORESAID COMPANIES ALONG WITH COPIES OF ACKNOWLEDGMENT OF THEIR RETURNS DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE ASSESSEE DID NOT PRODUCE THE DIRECTORS OR CONTROLLING PERSONS OF THE AFORESAID COMPANIES. MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THESE FOUR PARTIES, THERE IS NO JUSTIFICAT ION TO DRAW AN ADVERSE INFERENCE. IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES , AD DRESSES AND PAN OF THE AFORESAID INVESTORS. THE AO, APART FROM ISSUING NOT ICES UNDER SECTION 133(6) OF THE ACT, DID NOT PURSUE THE MATTER FURTHER. THERE WAS NO EFFORT MADE TO PURSUE THE SAID INVESTORS. IN THOSE CIRCUMSTANCES, THE ASS ESSEE COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IT CAN NOT BE SAID THAT T HE ASSESSEE DID NOT DISCHARGE THE BURDEN THAT LAY ON HIM[CIT VS. ORISSA CORPORATI ON LTD.,159 ITR 78(SC)] 5.2 INDISPUTABLY, THE STATEMENT OF SHRI S.H. MALIK WAS RECORDED ON OATH ON 23 RD JUNE, 2004 WHEREIN HE HAD SUBMITTED THAT M/S ONYX EXIM PVT. LTD. AND SHIMMER MARKETING PVT. LTD. DID NOT CARRY ON ANY MA RKETING ACTIVITY AND WERE ENGAGED IN PROVIDING ENTRIES ONLY. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE RECEIVED THE AFORESAID SUBSCRIPTION TO ITS SHARES V IDE CHEQUES DATED 23 RD DECEMBER, 2004,28.12.2004 AND 6 TH JANUARY, 2005. THUS, THE SAID STATEMENT BECOMES IRRELEVANT IN THE CONTEXT OF SUBSEQUENT I NVESTMENT MADE BY THE AFORESAID COMPANIES. CONSEQUENTLY, NO RELIANCE CAN BE PLACED ON THE SAID STATEMENT OF SHRI S.H.MALIK. DESPITE HAVING INFORM ATION FROM THE INVESTIGATION I.T.A. NO.964/D/2009 9 WING, THE AO DID NOT MAKE ANY FURTHER INQUIRIES. T HERE IS NOTHING TO SUGGEST THAT IN LIEU OF THESE CHEQUES, CASH WAS RETURNED TO THE AFORESAID COMPANIES. . 5.3 IN THIS REGARD, WE REFER TO THE DECISION OF TH E HONBLE APEX COURT DELIVERED IN THE CASE OF CIT VS. LOVELY EXPORTS 21 6 CTR 195. IN THIS CASE IT WAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVE D BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 5.4 FOLLOWING THE AFORESAID DECISION, WHILE ADJU DICATING AN IDENTICAL ISSUE,HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. DWARKADHISH INVESTMENT P LTD. IN ITA NO. 911/2010 VIDE ORDER D ATED 02.8.2010 HELD AS UNDER: - 6. IN OUR OPINION, AS SECTION 68 OF THE ACT, 1961 HAS BEEN INTERPRETED AS RECENTLY AS 2008 BY A DIVISION BENCH OF THIS COU RT IN DIVINE LEASING AND FINANCE LTD. (SUPRA) AFTER CONSIDERING ALL THE RELE VANT JUDGEMENTS, WE DO NOT HAVE TO RECONSIDER ALL THE JUDGEMENTS REFERRED TO BY MR. SAHNI WHICH ARE PRIOR IN DATE AND TIME TO THE AFORESAID JUDGEM ENT. IN FACT, A SPECIAL LEAVE PETITION FILED AGAINST THE SAID DIVISION BENC H JUDGEMENT WAS DISMISSED BY THE SUPREME COURT BY WAY OF SPEAKING O RDER IN C.I.T. VS. LOVELY EXPORTS (P) LTD. 216 CTR 195 (SC). THE SUPR EME COURT IN LOVELY EXPORTS PVT. LTD. (SUPRA) HAS HELD AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. WE FIND NO MERIT IN THIS SPECIAL LEAVE PET ITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MON EY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO RE OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGEMENT. I.T.A. NO.964/D/2009 10 7. CONSEQUENTLY, THE DOCTRINE OF MERGER WOULD APPLY AND THE JUDGEMENT OF THE SUPREME COURT IN LOVELY EXPORTS (P ) LTD. (SUPRA) WOULD COVER THE FIELD WITH REGARD TO INTERPRETATION OF SE CTION 68 OF THE ACT. 8. IN ANY MANNER, THE ONUS OF PROOF IS N OT A STATIC ONE. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDEN OF PROOF LIES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTITY OF THE CREDITORS/ SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBER OR INCOME TAX ASSESSME NT NUMBER AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MO NEY / HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY A NY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. JUS T BECAUSE THE CREDITORS /SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE, WHICH HAS ALL T HE POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE. 5.5 HONBLE JURISDICTIONAL HIGH COURT IN THEIR AN OTHER DECISION IN C.I.T. VS. OASIS HOSPITALITIES P LTD. ,333 ITR 119 CONCLUDED A S UNDER:- 27. THE ORDER OF ASSESSING OFFICER WOULD REVEAL THAT IT HAD RECEIVED AN INFORMATION FROM THE INVESTIGATION WING WHICH HAD M ADE VARIOUS ENQUIRIES / INVESTIGATIONS ON THE BASIS OF WHICH IT WAS FOUND THAT THESE SIX INVESTORS BELONG TO ONE MAHESH GARG GROUP WHO WERE NOT CARRYING ON ANY REAL BUSINESS ACTIVITY AND WERE RATHER ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATIONS ENTRIES. THEY WERE, THUS, ENTRY OPERATORS OF WHICH THE APPELLANT WAS THE BENEFICIARY. ACCORDIN G TO THE ASSESSING OFFICER, THE MODUS OPERANDI INVOLVED IN SUCH TYPE OF ACTIVITY WAS LIKE THIS: AN ENTRY OPERATOR OPERATES A NUMBER OF ACCOUNTS IN THE SAME BANK/BRANCH OR IN DIFFERENT BRANCHES IN THE NAME OF COMPANIES, FIRMS, PROPRIETARY CONCERNS AND INDIVIDUALS AND FOR THE OP ERATION OF THESE BANK ACCOUNTS, FILING INCOME TAX RETURNS ETC. PERSONS AR E HIRED. MOST OF THESE PERSONS WORK ON PART-TIME BASIS AND ARE CALLED UPON TO SIGN DOCUMENTS, CHEQUE BOOKS, ETC. WHENEVER REQUIRED. WHENEVER AN Y BENEFICIARY IS INTERESTED IN TAKING AN ENTRY, HE WOULD APPROACH TH E ENTRY OPERATOR AND HANDOVER THE CASH ALONGWITH COMMISSION AND TAKE CHE QUES, DEMAND DRAFT, POSTAL ORDER. THE CASH IS DEPOSITED BY THE ENTRY OPERATOR IN A BANK ACCOUNT EITHER IN HIS NAME OR IN THE NAME OF RELATI VE/ FRIENDS OR OTHER PERSON HIRED BY HIM FOR THE PURPOSES OF OPENING THE BANK ACCOUNT. AFTER THE DEPOSIT OF CASH WHEN THERE IS SUFFICIENT BALANC E, THE ENTRY OPERATOR ISSUES DEMAND DRAFT, POSTAL ORDERS, CHEQUES IN THE NAME OF BENEFICIARY. MOST OF THESE CONCERNS / INDIVIDUALS ALSO HAVE OBTA INED PAN FROM THE DEPARTMENT AND ARE FILING INCOME TAX RETURNS, BUT WHAT IS SHOWN IN THE RETURN IS NOT ACTUAL STATE OF AFFAIRS. I.T.A. NO.964/D/2009 11 28. THE APPELLANT FILED COPIES OF PAN, A CKNOWLEDGEMENT OF FILING OF INCOME TAX RETURNS OF THE COMPANIES, THEIR BANK ACC OUNT STATEMENTS FOR THE RELEVANT PERIOD, I.E. FOR THE PERIOD WHEN THE C HEQUES WERE CLEARED. HOWEVER, THE PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRECTION OF THE ASSESSING OFFICER INSTEAD OF TAKING OPPORTUNIT IES IN THIS BEHALF. SINCE THE SO CALLED DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED ON THIS GROUND COUPLED WITH THE OUTCOME OF THE DETAILED INQ UIRY MADE BY THE INVESTIGATION WING OF THE DEPARTMENT, THE ASSESSING OFFICER MADE THE ADDITION. THIS ADDITION COULD NOT BE SUSTAINED AS THE PRIMARY ONUS WAS DISCHARGED BY THE APPELLANT BY PRODUCING PAN NUMBER , BANK ACCOUNT, COPIES OF INCOME TAX RETURNS OF THE SHARE APPLICANT S, ETC. WE ALSO FIND THAT THE ASSESSING OFFICER WAS INFLUENCED BY THE I NFORMATION RECEIVED BY THE INVESTIGATING WING AND ON THAT BASIS GENERALLY MODUS OPERANDI BY SUCH ENTRY OPERATORS IS DISCUSSED IN DETAIL. HOWEV ER, WHETHER SUCH MODUS OPERANDI EXISTED IN THE PRESENT CASE OR NOT WAS NOT INVESTIGATED BY THE ASSESSING OFFICER. THE APPELLANT WAS NOT CONFRONTED WITH THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OR WAS GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION WING. 29. AS REGARDS DISCREPANCIES FOUND BY THE ASSESSING OFFICER IN THE BANK STATEMENT, SUFFICE IT TO MENTION THAT THE BAN K STATEMENTS THAT WERE FILED BY THE APPELLANT WERE PROVIDED BY THE S HARE HOLDERS AND WERE COMPUTER PRINTED ON THE BANK STATIONERY. THE SAME WERE FILED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDING WITHOUT ANY SUSPICION OF THEIR BEING INCORRECT. DURING THE ASSESSMENT PROC EEDINGS, THE APPELLANT WAS NEVER CONFRONTED BY THE ASSESSING OFFICER THAT THERE ARE DISCREPANCIES BETWEEN THE BANK STATEMENTS FILED AN D THE STATEMENTS DIRECTLY CALLED BY THE ASSESSING OFFICER . HOWEVER , EVEN AFTER CONSIDERING THE ALLEGED DISCREPANCIES, IT DOES NOT FOLLOW THAT THE AMOUNT OF SHARE CAPITAL WAS THE UNDISCLOSED INCOME OF THE APPELLANT . EVEN THE CORRECT BANK STATEMENTS AS CLAIMED BY THE ASSESSING OFFICER REVEAL THAT THE APPELLANT HAS RECEIVED CHEQUES FROM THE SHAREHOLDER S. IN THIS BACKDROP, THE FOLLOWING OBSERVATIONS OF THE COURT IN THE CASE OF C.I.T. VS. K.C. FIBRES LTD. (2010) 187 TAXMAN 53 (DEL) ARE REPRODUCED: IT IS STRANGE THAT WHEN THE ASSESSING OFFICER IS QUESTIONING THE BONA FIDES OF M/S DIAMOND PROTEIN LTD . FOR COLLECTING MONEY TO SUBSCRIBE TO THE SHARE TO THE CAPITAL OF THE APPELLANT, BUT IT IS THE APPELLANT WH O IS FASTENED WITH THE LIABILITY. THE ASSESSING OFFICER DID NOT QUESTION M/S DIAMOND PROTEIN LTD. IN THIS BEHALF. INSOFAR AS ASSESSING OFFICER IS CONCERNED, IT IS NOT DISPUTED THAT MONEY WAS PAID TO IT TOWARDS THE AFORESAID SHARE APPLICATION MONEY, BY MEANS OF CHEQUES. IT IS NOT FO R THE ASSESSING OFFICER TO PROBE AS TO THE SOURCE FROM WHERE I.T.A. NO.964/D/2009 12 M/S DIAMOND PROTEIN LTD. COLLECTED THE AFORESAID MONEY . IT WAS FOR THE ASSESSING OFFICER, IN THESE CIRCUMSTANCES TO INQUIRE INTO THE AFFAIRS OF M/S DIAMOND PROTEIN LTD. WHICH IS AN INDEPENDENT COMPANY INASMUCH AS NO FINDING IS ARRIVED AT BY THE ASSESSING OFFICER THAT THE TWO COMPAN IES ARE UMBRELLA COMPANIES OR HAVE ANY RELATIONSHIP WITH EACH OTHER. 30. WE ARE, THEREFORE, OF THE OPINION, THAT THERE IS NO MERIT IN THESE TWO APPEALS, WHICH ARE ACCORDINGLY DISMISSED AT THE ADMISSION STAGE ITSELF. 5.6 IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DEC ISIONS ,ESPECIALLY WHEN THE EXISTENCE OF AFORESAID SHARE APPLICANTS IS NOT IN D OUBT, WE HAVE NO HESITATION IN VACATING THE FINDINGS OF LOWER AUTHORITIES AND THER EBY DELETING THE AFORESAID ADDITION ON ACCOUNT OF SHARE CAPITAL . CONSEQUENTLY , GROUND NO. 2 IN THE APPEAL IS ALLOWED .AS A COROLLARY, GROUND NOS. 3 & 4 BECOM E ACADEMIC IN NATURE AND DO NOT SURVIVE FOR OUR ADJUDICATION. 6. GROUND NO.1 IN THE APPEAL BEING GENERAL IN NATUR E, NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THIS GROUND, DOES NOT REQUIRES ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.5 IN THE APPEAL, ACCORDINGLY, T HESE TWO GROUNDS ARE ALSO DISMISSED. 7. NO OTHER SUBMISSION OR ARGUMENT WAS MADE BEFO RE US. 8. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (RAJPAL YADAV) (A.N. PAHUJ A) JUDICIAL MEMBER ACCOUNTANT MEMBER NS I.T.A. NO.964/D/2009 13 COPY OF THE ORDER FORWARDED TO :- 1. M/S CANERON CONCRETE INDUSTRIES PVT. LTD., E-16 3, PANDAV NAGAR, DELHI-91. 2. INCOME TAX OFFICER, WARD 3 (2), NEW DELHI. 3. CIT (APPEALS)-VI, NEW DELHI 4. THE CIT CONCERNED. 5. THE DR, ITAT,I BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI